American Claims TWU Labor Proposal Will Widen Cost Disparity

American Airlines’ decision to retain its maintenance operations while its peers outsourced repair work is burdening the carrier with excessive costs, and a new labor proposal offered by the Transport Workers Union will only further disadvantage the company, the airline says in a presentation.

The presentation calls on the TWU to return to a tentative accord rejected earlier this year, and drop a new union proposal issued in March. That new accord, says American, would add about $360 million a year in new costs on top of the $600 million gap in labor expense the carrier says already exists between it and its peers.

Importantly, American also notes that its competitors outsource a significant amount of maintenance, repair and overhaul work, especially the heavy checks. American values this disparity at roughly $215 million.

The carrier also highlights staffing levels at its peers, which add at least 2,200 base mechanics to its payroll, and claims the TWU’s latest proposal will provide its members $20/hr. more than the airline’s competitors.

“This is important because it demonstrates American has a competitive cost disadvantage when compared to the other legacy carriers,” says the Dallas/Fort Worth-based company. “This disadvantage exists in large part because from 2002 to 2007, other legacy carriers were able to reduce their wages and benefits during the bankruptcy process. While American also restructured during this time, AA did not cut its costs as significantly as its competitors,” it continues.

American, which is in talks with all its major employee groups, believes new labor deals pending at its peers will eventually increase employee costs at its competitors. However, the airline argues that it must keep its costs near current levels to gain any benefit.

Wall Street, meanwhile, continues to bash American for failing to post the same returns as other domestic legacy carriers, and some analysts are even predicting failure for the embattled airline.